The State Bank of India reduced its home loan rates further by announcing a three-month-long “SBI My Home Campaign”, starting from Saturday. In SBI’s home loan scheme, interest rate for the first year is 8%, and for the next two years is 8.5% to 9% depending on size of the loan. It is linked with benchmark lending rates.
However, the chairman of the country’s biggest home loan lender HDFC, Deepak Parekh criticized the lending institutions like SBI, which gives home loan at differential rates — low rates for the earlier period and raising it later, stated DNA repot. Parekh warned that such artificial lower rates could lead to a subprime-like crisis, which happened in US housing market.
SBI has effected the steepest reduction in interest rate on home loan between Rs 30 lakh and Rs 50 lakh. However, the interest rate will remain same for the first year at 8%, it will be brought down to 8.5% from 9.5% during the second and third year. For the period beyond third year, the floating rate on the loan has been cut by 1.25 percentage points.
In its latest offerings, the interest rates on home loan offered by SBI will be lower that that of HDFC for the entire period of repayment, Even for the later half, the rate will be lower than HDFC. In fact, this aggressive stance of SBI will force the other banks to follow suit soon.
In case of home loan up to Rs 30 lakh, the benefit for the first year will remain the same with interest rate at 8%. But for the next two years, the interest rate has been cut by 0.5 percentage points to 8.5% from 9%. The fall in the interest rates after that will be 75 basis points.